GSK rumoured to be buying $5bn BioMarin

GlaxoSmithKline was a talking point as the blue-chip index finished a volatile
session in negative territory.

The pharmaceutical giant's hostile $2.6bn (£1.7bn) takeover bid for US-based Human Genome Sciences has provided those traders and hedge funds that bet on takeover deals a rare moment of excitement in a lacklustre dealmaking environment.

However, yesterday Glaxo was linked with a new multi-billion dollar takeover bid for a US pharmaceutical company.

Last week reports suggested Shire, up 12p at £18.91, was the UK-based predator stalking BioMarin, which researches and develops therapies for chronic genetic disorders causing enzyme deficiency of carbohydrate metabolism. Now, though, the latest gossip is Glaxo, down 4½p to £14.39, is in advanced discussions to buy BioMarin.

The FTSE 100 jumped 1.86pc at one stage following the news of the eurozone's €100bn (£80bn) Spanish bank bailout.

However, by the close the blue-chip had given up all its intra-day gains to close down 2.71 points at 5,432.37 after a poor start on Wall Street. The FTSE 250 also lost 40.71 points to close at 10,658.24.

David Jones, chief market strategist at IG Index, said: "After today's volatility we could well see some calm return to markets tomorrow, and even some tentative bargain hunters. But with the Greek general election looming this weekend it seems unlikely that investors will be happy to take on significant amounts of additional risk until the next act of the debt crisis plays out."

Banks had a mixed day. Royal Bank of Scotland fell 1.6 to 221.4p but Barclays edged up 0.2 to 190½p as some brokers gave the company a push.

Merrill Lynch said: "Obviously, we still have Greek elections, questions about GDP growth, and a number of other concerns on European banks. That said – over the weekend politicians addressed a major tail risk from Spain and we think investors looking to buy banks to participate in a risk rally should buy, Société Générale Barclays and Deutsche Bank."

The broker added: "Barclays is ...better capitalised than European peers and should benefit from Spanish backstop and recent Lehman ruling."

Elsewhere in the banking sector, Lloyds Banking Group rose to the top of the FTSE100 leaderboard, gaining almost ½ to 28½p. HSBC also rose 2.4 to 533.8p.

Glencore performed well, climbing 5¾ to 363½p, on news that Ivan Glasenberg, the company's chief executive, has bought a significant amount of stock for the second time in a week. Mr Glasenberg bought another 2.8m shares at a price of 356.6p a share. This comes after he bought 2.9m shares last week at a price of 344.3p a share.

Other mining companies were in the doldrums despite China's exports rising in May at more than double the pace analysts estimated.

Eurasian Natural Resources Corporation fell 17 to 406.8p and Mexican gold and silver mining company Fresnillo gave up 46p to £13.96. Kazakhmys also dropped 12½ to 692½p and Antofagasta dipped 6p to £10.54 as Royal Bank of Canada (RBC) downgraded the Chilean copper giant to "underperform". The downgrade came as the broker decreased its copper price forecasts. "We have lowered our annual price forecasts over the next 5 years by an average of 7.4pc, a big decrease for a single price change," said Timothy Huff, an analyst at RBC.

BSkyB slid 8½ to 687½p as US-based media giant Comcast poured cold water on rumours, which emerged late last week, that it is preparing a multi-billion takeover bid for BSkyB.

Last Friday evening the New York Times reported that Comcast is "exploring" whether BSkyB could become available for purchase and might be interested in buying News Corporation's 39pc stake in the London-listed broadcaster.

However, Comcast has subsequently denied the tale, with Michael Angelakis, Comcast's vice chairman and chief financial officer, reportedly saying over the weekend that the story was "complete rubbish" and "inaccurate".

Dealers also noted that Bank of America Merrill Lynch yesterday reiterated its "underweight" rating on BSkyB because of the weak consumer environment and threat from new competition.

On a more positive tack, Serco rose 6 to 546p after it announced the acquisition of Vertex Public Sector for £55m. Mike Allen, an analyst at Panmure Gordon, said the deal should provide additional scale capability to its fast growing global back-office outsourcing operation. "This will be a key ingredient behind its [Serco's] margin growth story, and the company should have the potential to expand its strong public sector offering into the private sector further down the line," concluded Mr Allen.

GKN, the British maker of aircraft components, perked up 1.6 to 183.4p after it said on Sunday that its aerospace unit won a contract to supply titanium and aluminum parts for Boeing Co.'s 787-9 Dreamliner.

BP climbed 5.8 to 414.9p following reports the oil giant hopes to soon settle penalties and damages from the Deepwater Horizon spill for less than $15bn - a figure much less than the market expected.

On the mid-cap index, Aquarius Platinum tumbled 8 to 65½p after the company announced that it has agreed with its partner Anglo Platinum, a subsidiary of Anglo American, to suspend operations at the Marikana mine because of low prices. Anglo American slipped 4½p to £20.69.

Business-to-business publisher UBM benefited from a Morgan Stanley upgrade to "overweight". Patrick Wellington, an analyst at Morgan Stanley, said: "UBM's Events are fast growing and the group's exposure is attractive. 2013 is boosted by the biennial Exhibition upswing and lower investment in other businesses." UBM gained 1½ to 552½p.